Microsoft Fined by EU for Not Offering Browser Alternatives

An "internal error" may end up costing Microsoft more than $700 million.

The company failed to fully comply with the European Union's (EU's) competition law and follow some binding legal commitments. Microsoft was supposed to have provided a means for Windows users in the EU to have access to alternatives to Microsoft's Internet Explorer browser, which gets bundled with its Windows operating system product. In July, the EC announced that Microsoft's compliance was under investigation.

Microsoft had initially complied with an EC stipulation that Microsoft supply a "browser choice screen" for Windows 7 users in the EU region. This screen listed other Web browsers besides Internet Explorer that could be downloaded by the user. The EU considers using one product to push another as anticompetitive under law, so the browser choice screen was seen as remedy to Microsoft's practice of including Internet Explorer with Windows.

The agreement with Microsoft was supposed to have extended for five years, from 2009 to 2014. However, Microsoft dropped its browser choice screen from Windows 7 Service Pack 1 between May 2011 and July 2012. The EC estimates that 15 million Windows 7 SP1 users didn't see the browser choice screen during that period, according to an announcement.

The EC found that the browser choice screen had been an effective antitrust remedy. There were 84 million downloads using it until November 2010. Microsoft had described its lapse of not including the screen with Windows 7 SP1 as an internal technical error. However, it was a full year before the EC announced to the public that the browser choice screens were going missing from Windows 7 distributions. The commission had relied on Microsoft's self-reporting on compliance. Meanwhile, competing browser companies alerted the commission to Microsoft's possible breach of protocol.

Joaquín Almunia, vice president at the EC for competition policy, described failures to comply with such EC agreements as "a very serious infringement that must be sanctioned accordingly." Under the EU antitrust rules, the EC can fine companies "up to 10 percent of the undertaking's total turnover in the preceding business year." Microsoft's revenue in fiscal-year 2012 was $73.7 billion, according to its annual report, so it looks like Microsoft got hit with a 1 percent fine.

Almunia has admitted that the EC needs a better remedy than self-monitoring by companies to ensure compliance. He suggested setting up trustees as a possible solution.

"However, on top of the consequences of our investigation on the Microsoft case, I am considering the strengthening of our monitoring for this type of decisions, for example by a more frequent appointment of monitoring trustees," Almunia said back in July.

Microsoft has been a bit of a scofflaw in the past with the EC. An account by The New York Timesestimates that Microsoft has been hit with $3.4 billion in fines over about a decade.